Economic Ideals: Gandhian and Neoliberal Logics in India

26 Feb 2013

This is part of a series of think pieces by scholars and practitioners working on a broad range of issues within the field of Social and Solidarity Economy. The series is being published in conjunction with the UNRISD conference “Potential and Limits of Social and Solidarity Economy”. The conference took place on 6-8 May 2013 in collaboration with the International Labour Organization and the UN Non-Governmental Liaison Service.

Social and solidarity economies differ greatly in terms of their underlying logics – the values, beliefs, rules and material practices by which people and communities reproduce their social realities.1 The significance of social economy logics should not be underestimated: while economic activities may appear similar in form, differences in the underlying logics can lead to stark differences in enterprise models and socioeconomic outcomes. In the case of India, we find a diversity of enterprise logics: some are underpinned by longstanding political and sociocultural hierarchies while others follow Western-centric norms and values. In this think piece we consider two broad types of enterprise model: Gandhian (sarvodaya) and Western (neoliberal). These models have influenced the nature of much economic activity occurring in India today. As such, they provide a revealing starting point for investigating variations in social and solidarity economic activity and outcomes.

Babita Bhatt is a PhD candidate at the Norman Patterson School of International Affairs, Carleton University, Canada. She previously taught at the Chinese University of Hong Kong and City University of Hong Kong. Her research interests include social capital, capability approaches and the social economy.

Samer Abdelnour is a PhD candidate at the London School of Economics and Political Science. His research interests include the global-local dynamics of humanitarian and post-war interventions, as well as social and collective enterprise in the face of adversity.

Israr Qureshi is Assistant Professor at Hong Kong Polytechnic University. He conducts qualitative and quantitative research on social enterprises as well as information and communication technologies for development.

Gandhian (sarvodaya) versus Western (neoliberal) logics

Western enterprise logics have travelled to India on two major waves of globalization: colonial imperialism and economic liberalization. Originating in response to an oppressive colonial and sociocultural order is the movement inspired by Mohandas Karamchand Gandhi (Mahatma Ghandi). The set of political and economic values embedded in Gandhi’s philosophies continue to influence socioeconomic structures and practices in India today. Gandhi’s notion of sarvodaya, translated literally as “everyone rise” and figuratively as “the welfare of all” or “uplift of all” Ishii 2001; Lindley 2007), advances strong ideals for solidarity economic and enterprise activity and provides the philosophical groundwork and motivation to address pressing social issues in a different way. Key characteristics of sarvodaya include cooperation, serving those in need, satisfying work, participation, and nonviolence (Kumarappa 1944; Lindley 2007). In practice, these translate into values such as local production, the importance of self-reliance, satisfying work,2 serving those in need,3 non-exploitation, equality and frugal consumption (Kumarappa 1944; Ishii 2001; Lindley 2007). Sarvodaya thus resonates strongly with social economy thinking and is widely accepted to play an important role in building community capacity. However, given that its ideological motivations include resistance to colonialism, it is no surprise that the values related to sarvodaya are in stark contrast to Western neoliberal notions of comparative advantage production, specialization and capital accumulation. Yet, in recent years the gap between these different logics has shown some signs of narrowing, at least at the level of business discourse. This has occurred in contexts where companies and business associations are emphasizing the importance of corporate social responsibility, the so-called bottom of the pyramid approach and social enterprise. While these promise a softening of neoliberal economic activity, they do not go nearly as far as addressing the socioeconomic needs and challenges faced by the growing numbers of economically marginalized people globally. While we do not wish to romanticize sarvodaya logics, we hope to contribute to the Social and Solidarity Economy discussion by presenting its ideals and how these may inform models of economic activity in contrast to neoliberal approaches.

We suggest that it is possible to compare and contrast varieties of social and solidarity economic activity in India along a continuum anchored by sarvodaya at one end and neoliberal logics at the other end. In fact, our research identifies a spectrum of enterprise models grounded in both neoliberal and Gandhian logics. Moreover, we find that seemingly similar models of economic activity may have significantly different philosophical origins, business models and modes of governance. In turn, these have strikingly different outcomes in terms of their ability to foster, reinforce or impair socioeconomic and community resilience in numerous dimensions, including: purpose, degrees of solidarity, formality, and levels and scope of analysis. We illustrate this using two seemingly similar examples of village-based poultry enterprises.

Sarvodaya-inspired case: Poultry Cooperative

Our first example is Poultry Cooperative (PC),4 a cooperative-based social enterprise comprising about 800 socially disadvantaged and low-caste women from dozens of villages. One of PC’s main objectives is to provide income opportunities to as many people as possible. In order to accomplish this goal, each member is given a small bird-rearing unit that can take care of 300–800 birds. Each cycle, from day one to full-grown chicken takes approximately five to six weeks. This is followed by a two-week immunization and maintenance break. Thus, in a year, each member is able to raise five to six batches, earning between R11,000 and R20,000 (approximately US$225 to US$400). PC works in remote regions where villages have few livestock or agricultural livelihood options. Prior to its establishment, villagers would work as migratory or construction labourers. Some even undertook the dangerous task of collecting artillery shells from a nearby military range for sale as scrap metal. In these villages, women have the added burden of domestic responsibilities, such as collecting water and caring for the elderly. Understanding these social dynamics, PC directly supplies women with necessary equipment, day-old birds, feed, medicine and other materials.

Decision making at PC is participatory. Member-producers elect their own president, general secretary and other officers from among producers. Every village is represented by at least one woman who is elected by the producers in that village. Every week there is a meeting of producers open to any producer, but mandatory for village and producer representatives. At this meeting, supervisors provide information on matters like abnormal cases of bird mortality or low weight gain. Support staff is selected to ensure technical knowledge and to foster producers’ trust. In addition, a trained para-vet, usually a son or husband of a producer, is chosen in each village of 25-30 producers. The para-vet provides production support and is responsible for supervision during disinfection of sheds, distribution of inputs, vaccinations and lifting of the birds. Each producer is paid on the basis of a production efficiency index, which is a function of pre-determined price, percentage of bird survival and average weight gain. Because payment is not dependent on market price, growers are able to withstand market fluctuations.5 Moreover, any profit made by PC is distributed among the producers based on village efficiency and not individual productivity. This creates a two-tiered system of reward: an individual-level efficiency index and a village-level bonus.

PC’s operations are structured around the needs of the villagers and take into account their family situation. This enables women to combine work with traditional responsibilities, thus maintaining family and social ties. PC also ensures that producer communities are self-reliant by having all the necessary support within each village (for example, para-vets and supervisors). This further creates mutual interdependences and strong socioeconomic ties within the communities. Moreover, although PC’s producers, president and other office bearers are women, PC engages men as support staff. By attaining the dual objective of empowering women with minimal alienation of men, this structuring mechanism avoids the gender disparities often associated with enterprise and finance initiatives. In addition, individual production avoids the pressures of self-selected or self-help groups. Still, as producers invest time and effort in raising the birds, they do share responsibilities with neighbours and other community members when leaving birds unattended for a day or two. Thus, inter-member relations are based on mutual reciprocity rather than direct enterprise outcomes. Similarly, the individual plus village-level performance measures incentivize social interaction in the form of information sharing and joint care of birds.

Neoliberal case: Bird Poultry

Our second case is Bird Poultry (BP), which works in the same province as PC but in different locations. BP is a conventional for-profit market-focused enterprise that, given its work in poor villages, brands itself as a social enterprise. Like PC, BP uses a contract producer model, provides day-old birds to producers and collects grown chickens, and also delivers all feed and medicines to the producers. However, there are some significant differences between PC and BP. BP uses a bidding process to allot contracts to chicken producers throughout its areas of operation, a common practice in the poultry industry. The bidding process works as follows: BP invites bids from potential producers in the form of a quote price per bird for raising day-old birds to full-grown chickens. Contracts are awarded based on an optimum combination of lowest price and contract size in order to minimize BP’s operation costs. There are no performance or bonus payments. BP holds tremendous decision-making power in the contractual relationship, and contracts are usually awarded to only one producer in a given village. The minimum number of birds that BP will allocate to a producer is 10,000, although allocations have been known to top 100,000. At these large amounts, poor and marginal people are effectively excluded from BP’s activities, at least from participating directly. Moreover, given the scale of operations involved in the BP model, women are rarely contract holders. Because an annual allotment of contracts is not guaranteed, producers cannot rely on poultry activities alone. As a result, producers often engage in numerous alternative businesses because they do not view BP as offering a consistently dependable income opportunity. From a social and solidarity perspective, bidding for birds creates frictions and rivalries among friends, neighbours and relatives.

Enterprise logics and the social construction of solidarity

Much research explores the relationships between market activity and economic growth, but little is known about the influence of underlying ideals and values shaping the construction of social and solidarity economic activity. The above examples—seen through the lens of enterprise logics—imply that variations in underlying ideals and values may cultivate on the one hand community resilience, economic stability, employment and democratic governance, or, on the other hand, individualism, competition, economies of scale and dependence. Although the geographic scope of BP’s operations is much wider, both PC and BP are poultry suppliers working in villages through contract farming mechanisms. In fact, BP is a major national supplier in the poultry industry while PC is a much smaller player by design. With a focus on socioeconomic sustainability, PC prefers to move into new villages with small operations rather than expand existing operations. For example, PC has estimated that a certain number of chickens will provide sufficient income to sustain livelihoods in the villages they operate. Thus, if all the existing producers reach a given threshold, PC prefers to expand its operations to new villages rather than increasing the scale of production with existing producers. Extending to new villages is costly, especially given the level of embeddedness of PC’s operations. It is also inherently risky, as new operations inevitably entail higher bird mortality. Yet PC’s driving logic emphasizes notions of social value creation and community-based economic resilience more than conventional notions of economic maximization or efficiency.

This suggests that economic activity underpinned by sarvodaya logics embodies significantly different notions of scale and scalability when compared with those operating along neoliberal logics. Given variations of scale and community embeddedness, the differences in PC’s and BP’s enterprise models produce extremely different realities for the producers they work with. While the density of community economic integration resulting from PC’s approach is not without potential negative effects, the overarching intent of the PC model is aligned with the values and principles of sarvodaya. BP, on the other hand, works along a classic neoliberal model of efficient allocation and profit maximization. Both PC and BP, as legitimate enterprises and suppliers of quality poultry, compete with one another within the same market system and regulatory-institutional framework. While both models are economically viable, their differing approaches express contrasting logics—values, beliefs, rules and practices—and outcomes in terms of Social and Solidarity Economies. As indicated above, the differences between them are evident along many dimensions at the level of the producer. However, at a more macro level, we find that while BP is a far larger company and thus employs more people in aggregate, PC’s model creates greater employment per capita. That said, if PC’s business was to grow to the same size as BP in terms of total poultry produced, far more people across a greater number of rural areas would be gainfully employed.

In order to advance a better understanding of Social and Solidarity Economies, the underlying ideals and values that inform economic activity must be explored at a deeper level. Our research, which suggests that ideals certainly govern economic activity, challenges many common assumptions of neoliberal thinking. By linking ideals to enterprise models and economic activity, better policies and practices could serve to foster and protect those market activities that create positive social value. Moreover, if cultivating Social and Solidarity Economies is indeed a desired outcome, then economic practices that express the ideals of solidarity—such as community resilience, full and stable employment, democratic governance, sustainable scale—must be appropriately elaborated, measured and internalized so that they can be taken into serious consideration by economic policy makers and planners.

FOOTNOTES1Thornton and Ocasio 1999.

2Involvement of village residents in producing the necessities of life which satisfy the requirements of most, if not all, of the residents.

3The expectation that resource-rich individuals will use their resources for the benefit of the community i.e. they may posses wealth and use it for their personal needs to a reasonable extent, but they act as trustees of the remaining wealth and use it for the sarvodaya, or upliftment, of the community.

4Enterprise names have been changed to retain their anonymity.

5It is important to note that there are no subsidies involved in PC’s operations. Nor is the price paid to producers entirely disconnected from the market. The per chicken price paid to producers is pre-determined, and based on numerous considerations including market prices, but also living costs, etc. However, as the primary goal of the price paid to producers is to ensure a sustainable livelihood, consistency in income is important.